India's importance as a location for outsourcing pharmaceutical manufacturing is set to grow rapidly in the future, according to a study conducted by the US National Science Foundation.

The study points to the fact that India has the second largest number of pharmaceutical manufacturing facilities approved by the US FDA. This has allowed Indian drugmakers to expand their export trade, with many targeting the lucrative markets of the European Union (EU) and US. Exports are expected to reach US$2.15bn by 2009.

Increasing numbers of foreign drugmakers are also setting up production facilities in India as manufacturing expertise in the country grows. Part of this has undoubtedly been due to Indian efforts to tighten up patent-protection legislation. Recently released official statistics claim that pharmaceuticals accounted for the largest portion of FDI in India, reaching some INR15.7bn (US$361mn) in the 2004 financial year.

Meanwhile, there has been a significant increase in R&D spending in the country. The government has been keen to support this trend and a number of new state-of-the-art pharmaceutical parks have been built, including an INR3.13bn (US$69.27mn) "Pharma city" in Andhra Pradesh. In addition, clinical trials worth US$100mn were undertaken in India last year with this trade forecast to reach as much as US$1bn by 2010.